1. Field of the Invention
The present invention generally relates to a method, system and program product for selecting a supplier. Specifically, under the present invention, one of a plurality of suppliers of an item is identified based the supplier offering a lowest total cost for providing the item to a buyer.
2. Background Art
As computer technology continues to advance, individuals and businesses are increasingly utilizing computer networks such as the Internet to perform everyday tasks. For example, today a potential buyer can search for and purchase various goods/services over the Internet. Typically, buyers seek to minimize spending on purchased goods and services. In the case of businesses, such savings can pass directly to bottom line profit. Traditional purchasing involves buyers seeking price quotations for all goods/services sought (e.g., either for immediate purchase or from an open contract against which future purchases are made). In many cases, the buyers choose three or four suppliers and solicit a price quotation therefrom. Unless the buyer happens to know which suppliers will present the most cost effective options, the buyer generally relies on luck soliciting from the lowest priced suppliers. In addition, in traditional purchasing methods such as this, economic purchase quantity (e.g., sometimes referred to as economic order quantity) is determined by optimizing tradeoffs between fixed costs and inventory costs. This generally assumes a perpetual life span of the goods/services purchased, and ignores the financial impact of scrap or waste for goods/services that have a finite life span.
Heretofore, various system such as SAP and MAPICS have been developed for fostering network-based purchasing. Unfortunately, such systems assume that supplier selection is determined explicitly from parameters of the goods/services sought and predetermined order volumes. Thus, the existing systems fail to address the issues that arise with goods/services having a finite life span. Moreover, the existing systems fail to determine an optimum order quantity, which can vary based on the supplier. Accordingly the existing systems fail to provide a way to truly minimize spending by identifying a supplier that has the lowest total lifetime cost.
In view of the foregoing, there exists a need for a method, system and program product for selecting a supplier. Specifically, a need exists for a system in which componentized costs for providing an item are collected from a plurality of suppliers. Another need exists for the componentized costs to be approved before they are utilized to process an order. A further need exists for a total (lifetime) cost for the item to be calculated for each of the suppliers based on a demand forecast, a particular order specification for the item and the approved componentized costs. Still yet, another need exists for the supplier having the lowest total (lifetime) cost for the lifetime of the item to be identified.